First Inter Partes Review & Covered Business Method Filings Headed to the USPTO

The USPTO’s Patent Trial & Appeal Board (PTAB) opens its doors for business this coming Monday. As a reminder, submissions to the PTAB will need to be filed via the Patent Review Processing System (PRPS). The web portal system will go live over the weekend, but will only accept a maximum file size of 10MB. (per single uploaded file, PAIR currently accepts 25MB). The system is designed to accept a maximum file size of 250MB, however the lower size limit appears to have been adopted for the short term to ensure that the system is not overloaded.

The USPTO’s FAQs for the PRPS have recently been expanded (here).

Today also marks the last business day to file requests for inter partes patent reexaminations, the USPTO may see as many as 50-60 such filings today alone. There is also expected to be a surge of ex parte reexamination filings before the new fee kicks in on Monday.

Continuation Applications to be Collateral Damage to PTAB Proceedings?

The new patent validity trials of the Patent Trial & Appeal Board (PTAB), Post Grant Review (PGR), Transitional Program for Covered Business Method Patents (TPCBMP), and Inter Partes Review (IPR) introduce a new layer of estoppel for Patentees. This estoppel, once triggered by claim cancellation or refusal by the Patent Trial & Appeal Board (PTAB), could operate to effectively forfeit a Patentee’s continuation application portfolio.

The danger is significant as it is common practice for many Patentees to maintain continuation patent applications long after the issuance of a first patent. The pending continuation applications allow Patentees to adapt/refine their claims to changing products of the marketplace such as when competitors attempts to “design around” the claims of the initially issued patent. In this way, a robust continuation portfolio serves as a further hedge against infringement of the base patent. Indeed, for many large stakeholders, continuation patent application portfolios constitute a major investment.

Once a patent is challenged in a petition for IPR, PGR, or TPCBMP, what can a patentee do to protect their investment in continuation patent applications?

First, let’s start with the rule that creates the “patentee estoppel” of the new post grant trials, Rule 42.73(d)(3). The rule provides as follows:

(3) Patent applicant or owner. A patent applicant or owner is precluded from taking action inconsistent with the adverse judgment, including obtaining in any patent:

(i) A claim that is not patentably distinct from a finally refused or cancelled claims; or

(iii) An amendment of a specification or of a drawing that was denied during the trial proceeding, but this provision does not apply to an application or patent that has a different written description.

(emphasis added)

As can be appreciated, the lack of patentable distinction between a continuation application and a previously issued patent, for many large patent filers, is a trivial concern in light of widespread terminal disclaimer practice. However, going forward, large patent filers will be wise to avoid such situations as the same patentable distinction analysis may now doom a continuation patent application.

Consider the situation where a parent patent has a broad, generic claim that is cancelled or refused in a post grant trial of the PTAB. If the continuation (or reissue) applications present claims of indistinct scope to that which was cancelled or finally refused, and if one assumes that the specification is identical in relevant respect, the Patentee is estopped from pursuing the pending continuation claim. As the PTAB will operate under the premise that the continuation application claim should be barred under Rule 42.73(d), the Patentee would be effectively forced to introduce the indistinct, continuation claims in the PTAB proceeding, or lose them. Yet, the trial rules do not provide a mechanism for introducing claims en masse outside of a “reasonable number of substitute claims.” In fact, a reasonable number of claims is defined as those presented in one-to-one correspondence with respect to cancelled claims. Therefore, the best strategy is to avoid such a dilemma, but how?

Preemptive Model

Continuation practice should be avoided in favor of a parallel divisional application practice. That is to say Patentees should present multiple claim sets in a single filing to encourage restriction by the USPTO, necessitating the filing of divisional applications. Once claims are restricted, which practically speaking seems to occur anytime there are more than 20 or so claims in a single application (irregardless of the propriety of the restriction), the Office has essentially issued a finding that the claims are patentably distinct.

This step may seem extreme. But, for patent filers with large, actively licensed portfolios, especially those directed to telecommunications standards, such preventative efforts make sense as a general practice.

After-the-Fact Model

For those with smaller portfolios, or those caught in the cross hairs of a newly filed petition in the coming weeks, there are far fewer options.

The PTAB proceeding will be pending from petition filing to decision for roughly 17-24 months (5-6 month petition phase, followed by 12-18 months of trial phase). During this time, continuation claims should be collected and refiled in a single application to force restriction, or accelerated to the extent possible. Yet, the PTAB will have jurisdiction over these filings once a trial is instituted, and they have broad powers to stay such proceedings.

A “poison pill option” would seek to exploit an oversight in the rule. Keep in mind that patentee estoppel is only triggered by an “adverse judgment” that “finally refused or cancelled claims.” Arguably, the rule would not seem to embrace claims that are statutorily disclaimed (i.e., not “finally refused or cancelled”). Thus, a Patentee may choose to battle it out at the PTAB for a period of time. When it becomes clear that the written decision is very likely to be adverse to the patent, it may be wiser to statutorily disclaim the subject claims (or perhaps just the broadest claims) in the interests of preserving the continuation portfolio.

And, of course, you can try to settle the trial before an adverse decision….or just win 🙂

Stafford Legal Webinar on PTAB Practice

Next week, the Patent Trial & Appeal Board (PTAB) will begin to accept petitions for the post grant patent validity trials of the America Invents Act (AIA). For those needing a refresher, or crash course in the new proceedings, next Tuesday September 18th Stafford legal will host a 90-minute webinar entitled New USPTO Rules for Post Grant Proceedings (Stafford Legal).

As part of the presentation, my colleagues and I will provide guidance for counsel to IP owners on changes to implement for inter partes review proceedings, post-grant review proceedings, and the transitional program for covered business method patents. We will also discuss strategic considerations for post-grant practice.

Patentees Faced with a New Game on September 16th

For those litigious patentees that have not paid much attention to the passage of the America Invents Act (AIA), or more particularly, the details of the new post grant validity trials of the Patent Trial & Appeal Board (PTAB), a rude wake up call may be headed in your direction. Starting this Sunday, petitions for Inter Partes Review (IPR) and the Transitional Program for Covered Business Method Patents (TPCBMP) will begin to be accepted by the USPTO.

IPR is available for all existing patents (but note the dead zone for very recently issued patents). This is a big change from the previous inter partes patent reexamination model which could not reach patents that stemmed from applications filed before November 29, 1999. TPCBMP will permit the presentation of invalidity arguments that are not based on patents and printed publications. Presentation of non-documentary evidence was not permitted under the old reexamination based system.

There are some standing requirements for petitioners, however, that may prevent some from filing a petition for IPR/TPCBMP. In IPR. standing considerations are primarily based upon certain parallel litigation factors. Namely, a petitioner that has filed a previous declaratory judgment of invalidity against a patent cannot later challenge the patent in IPR, nor can a petitioner that has been served with a complaint for infringement at least 12 months prior. As to TPCBMP, only those petitioners that have been sued or charged with infringement of a qualifying “business method” patent have the necessary standing.

Both IPR and TPCBMP proceedings will provide for limited discovery, be conducted exclusively by Administrative Patent Judges (APJs) of the PTAB, and completed within 12-18 months, by statute.

With the expanded scope and benefits of the PTAB trial proceedings, patentees that previously were unaffected by patent reexamination may find themselves on unfamiliar ground in a few days. So, if your patent becomes the subject of a petition for IPR or TPCBMP, now what?

First, the speed at which these proceedings will be conducted cannot be overstated. Within days of receiving the confirmation copy of the petition, counsel should be retained. Almost immediately, initial disclosures may be exchanged and ageed upon discovery may be conducted between the parties (even though discovery at this point is unlikely). Additionally, the Patentee has three months from the filing of the petition to consider a preliminary response strategy.

As a reminder, prior to ordering a trial in either of the new proceedings, Patentees will now have the option of submitting a preliminary response to persuade the PTAB that the petition is without merit. While on paper the filing of a preliminary response may seem to foster a more balanced system, in practice, such filings may not be as commonplace as one might expect.

Keep in mind that the USPTO has predicted in their rule packages that the IPR that the grant rate will be 90% (as compared to the current 93%  grant rate of inter partes patent reexamination, which has no preliminary response mechanism). Still, many are quick to embrace the preliminary response as a “no-brainer” opportunity to persuade the PTAB that a trial should not be instituted….but such filings can have very undesirable effects.

The strategy pertaining to preliminary responses will be dictated, in large part by co-pending litigation status.

No Litigation

Setting aside the unfavorable statistics for a moment, let’s assume there is a fairly straightforward, but somewhat latent technical error exists in a claim chart or petitioner argument. Pointing that error out prior to institution of the proceeding and convincing the PTAB to deny the petition will simply permit the petitioner to cure the defect, and refile. On the other hand, once the PTAB trial is instituted, estoppel will attach to a written decision, effectively preventing any further petitions….better to win later in that scenario.

Second considering the statistics, the harm in filing a preliminary response is that it is unlikely to prevent a trial as to every claim. In the process, you have given the petitioner an advance preview of your arguments. Indeed, the preliminary response cannot even include rebuttal  testimony (expert declarations) without a showing of cause (interests of justice; 42.107; 42.207). So, the odds of rebutting a petition that includes such evidence is quite low. Moreover, by providing advance notice the third party may avail themselves of the supplemental information provision (42.123; 42.223). Such supplemental information could allow a third party to further refine their positions based on the Patentee’s preliminary response, if filed.

However, there are instances in which a preliminary response is a “no brainer.”

Litigation

Using the example above of the latent defect, if the preliminary response is due to be filed after the 12 month litigation window has expired, the petitioner will be prevented from re-filing. Thus, there is no downside to filing a preliminary response at this point, assuming there is a strong sense that the patentee will prevail and not simply provide advance notice of their positions.

If the petitioner is seeking to stay the parallel litigation, patentees will almost certainly file a preliminary response to avoid appearing uncooperative to the judge charged with determining whether or not the stay should be granted. In such cases, it is expected that procedural issues will be the preferred form of attack for the reasons noted above; this tactic is discussed next.

Standing

Another instance where a preliminary response will almost always make sense is if it presents arguments pertaining to standing. For example, arguments that point out that the patent subject to the TPCBMP does not qualify as a “business method,” or the petitioner has not been “charged with infringement.” Likewise, it may be argued in a preliminary response that the IPR is not proper based on the parallel litigation status (DJ filed on invalidity, or outside the 12 month window). These type of procedural victories will also prevent refiling and almost always make sense.

The strategies and decision making in the new post grant proceedings of the PTAB will come quickly and continuously after petition filing, prudent patentees will take the matter seriously. Later this week I will discuss additional patentee strategies to employ in anticipation of a PTAB trial.

USPTO Webinar Scheduled Today, FAQ Published

As a reminder, the USPTO will conduct a training session from 10 am – noon, in the North Auditorium of the Madison Building at the Alexandria Campus of the USPTO. The training session will be directed to the new Patent Review Processing System (PRPS) of the Patent Trial & Appeal Board (PTAB). The session will be broadcast via WebEx and available for replay thereafter. Information to connect to the training session via WebEx is provided below.

WebEx participants will be able to submit questions through the WebEx chat session.

The USPTO has also issued a brief FAQ on the PRPS system:

1. When will PRSP be active?

It will be active at 12:01 am on Sunday morning of September 16, 2012. The Board will have personnel available if users have questions about using PRPS. After September 16, the Board will resume normal business hours (Monday through Friday (except federal holidays) from 8:30 a.m. to 5:00 p.m. Eastern Time). Please note that a petition submitted on Sunday, September 16, 2012, that satisfies the rules – including payment of the requisite fees, will be accorded a filing date of September 16, 2012. However, because September 16 falls on a Sunday, the petition accompanied by payment of the requisite fee may be submitted on the next succeeding secular or business day (35 U.S.C. 21), i.e., Monday, September 17, 2012. 

2. Can I use PRPS to search for a proceeding without registering? 

Yes, a non-registered user may search for a proceeding and review most documents related to a proceeding.  However, if you want to file a document or submit a fee payment in a proceeding, you must be a registered PRPS user.

3. Who can register?

Anyone can register to use PRPS and obtain a user ID, such as a pro se patent owner or an attorney who is not registered to practice before the Office under 37 CFR 11.6. 

4. What information is required to register?

When you are registering to use PRPS, you have to select a unique user ID and password, and enter your name and an email address.  If you are a USPTO registered practitioner, you should enter your registration number. 

5. Can I share my user ID with my paralegals or other attorneys in my organization?

Yes, a single user ID may be shared among a working group.  It is important to keep in mind, however, that PRPS docket display is based on the user ID.  Therefore, the registered user must ensure that sharing his or her user ID would not violate any protective order.

6. When will my petition be accorded a filing date?

Once the Office reviews the petition and determines whether the petition is complete and the appropriate fees have been paid, the Office will send a notice to the petitioner and patent owner.  The submission date of the compliant petition will be accorded as the filing date.

In the situation where a petition complies with all of the statutory requirements but contains only minor defects, the Office will notify the petitioner of the defects.  When the defects are corrected within the time period set forth in the notice, the Office will accord the original submission date as the filing date. 

For fee deficiencies, however, the Office will accord the later submission date when all appropriate fees have been paid because the fees are required by statute.  See, e.g., 35 U.S.C. 312(a)(1).

Proposal Apportions Post Grant Patent Trial Fees Into Petition & Trial Phases

As I predicted in early August, the USPTO has announced a proposal to apportion the filing fees for the new post grant proceedings of the Patent Trial & Appeal Board (PTAB) across petition and trial phases; primarily as a mechanism to facilitate refunds. A portion of the proposed fees would correspond to the cost of considering the petition filing, the second portion would correspond to the cost of conducting the trial. This proposed fee structure is set pursuant to Section 10 of the America Invents Act (AIA), and provides revised fees not only for the new post grant patent proceedings, but also for ex parte application prosecution as well. The Notice of Proposed Rulemaking (NPRM) will be published in the Federal Register on Thursday. (advanced reading room copy here)

Aside from the post grant fee apportionment (discussed in detail below, which actually provides a slight fee reduction), notable fee increases include a change to the RCE filing fee for ex parte prosecution. The RCE fee based upon the number of previously filed RCEs. For example, the cost of an RCE moves from the current $930 for large entitites to $1200 for the first RCE, and $1700 for the second and subsequent RCEs. You may recall that initially the USPTO was seeking a change to $1700 for all such filings. The Office has now recognized that since 70% of applicants file at least one RCE, it seems some modest additional time is required to resolve most issues, hence the difference in pricing between the first and second RCE filing.

As to fee decreases, the following are noteworthy:

-The filing fee for ex parte patent reexamination is proposed to be decreased from the $17,750 (effective on September 16th) to $15,000, corresponding changes are made for small entity and micro entities. The filing fees for supplemental examination is likewise decreased.

Returning back to the apportionment of post grant fees, currently, the post grant fees are all inclusive, $27,200 for Inter Partes review (IPR) and $35,800 for Post Grant Review (PGR) (plus any excess claim fees). These all inclusive fees are non-refundable.

The USPTO has proposed allocating the specific costs of post grant proceedings into four discrete components. The proposed fee structure enables the USPTO to readily identify funds for refund.

Using IPR as an example, the first fee component is the cost of filing an IPR petition, which is set to a flat $9000 (for up to 20 claims). If the IPR is not instituted, this fee is not returned. The second fee component is a $200 surcharge per claim for each claim in excess of 20. The second fee component is refundable if an IPR is not instituted.

The third and fourth fee components are trial institution fees. The third is $15000 for an IPR trial of up to 15 claims. This fee is refundable if the trial is not instituted. The fourth fee is a $400 surcharge per claim for each claim over 15.  This fee would be returned if the IPR is not instituted.

Following the above guidleines, the USPTO has provided an example for an IPR seeking a trial on 52 claims. The petitioner would pay $44,200 ($9,000 plus 32 (52-20) x $200= $15,400); this is the first and second fee components. The third and fourth fee components would be calculated as ($14,00 plus (52-15) x $400=$28,800.  $15,400+$28,800 = $44,200

The USPTO reasons that 25% of petitioned claims will not be reviewed for trial (hence the 20 claim and 15 claim difference in fee calculations). Under the current all inclusive fee structure the same IPR would cost $46,400. ($27,200 + (32 x $600))

With the publication of the NPRM, the USPTO is opening a 60-day comment period in which the public can provide input on the latest proposal. Following the comment period, the Office will prepare the final fee-setting rule, which would go into effect no less than 45 days after it is published in the Federal Register.

AIA Changes Only Days Away

Back to school everyone…..the USPTO will kick off its AIA roadshow series in Minneapolis on September 10th and finish up in New York City on September 28th. The roadshow program will explain the final rules and answer audience questions. The agency also will discuss proposed rules for the first-inventor-to-file provision. Additional stops will be made along the way in Atlanta, Denver, Detroit, Houston, Los Angeles, and Alexandria, Virginia. The full schedule is shown below:

Date Venue Location

Monday, September 10

Hennepin County Library

Minneapolis, MN

Wednesday, September 12

USPTO Campus

Alexandria, VA

Friday, September 14

Los Angeles Public Library

Los Angeles, CA

Monday, September 17

Denver Public Library

Denver, CO

Thursday, September 20

Detroit Public Library

Detroit, MI

Monday, September 24

Georgia Institute of Technology Library

Atlanta, GA

Wednesday, September 26

Rice University Fondren Library

Houston, TX

Friday, September 28

New York Public Library

New York, NY

Later this week, the USPTO will be conducting a training session at the Alexandria USPTO campus (also available by webinar) on the new electronic filing system of the Patent Trial & Appeal Board, which is known as the Patent Review Processing System (PRPS). Information below:

To help potential users of the PRPS electronic filing system, the Office will hold a training session from 10 am – noon on Thursday, September 6, 2012, in the North Auditorium of the Madison Building at the Alexandria Campus of the USPTO. The training session will also be broadcast via WebEx. Information to connect to the training session via WebEx is provided below.

WebEx participants will be able to submit questions through the WebEx chat session.

September 15 Deadline Fast Approaching

Yesterday, the USPTO issued a notice entitled September 15, 2012 Deadline to File Requests for Inter Partes Reexamination Proceedings and Modification of Notice of Failure to Comply Form (here) The notice is essentially a warning to practitioners that although September 15th is the official filing deadline for inter partes patent reexamination filings, the practical filing deadline is likely the week of September 4th.

The Notice explains that Requesters are advised to file any inter partes reexamination requests which they intend to file as soon as possible, in order to provide the United States Patent and Trademark Office (Office) with maximum time to: (i) Receive, process, and review such requests for their compliance with all the filing date requirements for inter partes reexamination; and (ii) notify the requester of any deficiencies in the request via a Notice of Failure to Comply with Inter Partes Reexamination Request Filing Requirements (Notice of Failure to Comply) while providing sufficient time for requester to submit a corrected/replacement request prior to September 16, 2012.

In other words, any issues of non-compliance must be corrected by September 15th. If the corrected/replacement request is not received by the Office as of September 15, 2012, the corrected/replacement request will not be accorded a filing date, even though the original request was timely received by the Office. This is so, regardless of when requester receives notification that the original request is not filing-date compliant.

Although not stated in the notice, paper filings should likely be avoided. This is because such filings also have to be scanned into the EFS system and, as a result, may introduce further delay.

Record Verdict Demonstrates Fallibility of Jury Trials

There has been a ton of armchair quarterbacking since last Friday’s one billion dollar damage verdict in the Apple/Samsung patent war. While Apple is generally regarded as a high-tech innovator, many commentators take issue with the mechanism by which Apple has asserted their rights. Many uninformed commentators are quick to decry the verdict as an exploitation of a patent system in need of reform. Yet, it is important to note that the U.S. patent system was reformed not even a year ago. The vast majority of legislative changes to U.S. patent laws will only begin to go into effect this September 16th.

Nowhere is the potential for the current AIA reform more clearly pronounced than in the public statements of the Apple/Samsung Jury Foreman.

When interviewed by Bloomberg (link here), the foreman explained (around the three minute mark) that his “aha moment” in assessing the alleged obviousness of Apple patents was when he realized that the Apple software would not work on the processor of the prior art. This is an odd statement considering that the test for obviousness is not whether features may be bodily incorporated into a prior art structure, but rather, what the combined teachings of those references would have suggested to one of ordinary skill in the art. In re Keller, 642 F.2d 413.

It could be that the Foreman was simply being inarticulate in his explanation. However, it seems far more likely that the jury was confused as to a proper obviousness analysis; this is not at all surprising. The Foreman and his colleagues were tasked with an impossibly complex mission: to navigate over a very short period of time, unfamiliar and arcane legal concepts mashed together with complex questions of technology. For this reason, jury verdicts and their corresponding damage awards can be quite the “crap shoot.” Not surprisingly, most patent litigation will settle prior to a jury trial.

After September 16th, defendants will have a choice to continue on to roll the dice at the district court with a jury trial of laypeople, or avail themselves of the new USPTO patentability trials of the AIA. The new trial proceedings of the AIA will be completed within 12-18 months of initiation and will be conducted before the USPTO’s Patent Trial & Appeal Board (PTAB).

Unlike jurors, the decision makers of the PTAB are not laypeople. Rather, PTAB judges are experienced in the application of U.S. patent law and must additionally have an engineering and/or science background. In addition to the established expertise in technology and patent law, unlike the courts, PTAB judges do not accord patents a presumption of validity, nor do they require clear and convincing evidence to invalidate a patent. Indeed, patent claims are accorded a broadest reasonable interpretation at the USPTO, which makes them that much easier to invalidate.

While some will take advantage of the alternative to litigation this September 16th, others will insist that they “save their arguments” for court. As between the two paths, the choice seems rather “obvious” to me.

Inventor Alleges AIA Unconstitutional

Back during the drafting of the America Invents Act (AIA), some questioned whether the switch to a “first-inventor-to-file” system was constitutional. The argument was that the Intellectual Property Clause of the U.S. Constitution (Article I. Sec. 8) guaranteed the exclusive rights of inventions to “inventors,” and that this term could not embrace another, later in time filer, in the interests of administrative expediency. That is to say, the AIA was criticized as providing a “first-person-to-file” system, which awards the label “inventor” to the first person in the door at the USPTO.

Last month, a small Florida business, MadStad Engineering, filed suit against the U.S. government & USPTO to block implementation of the first-inventor to file system based on the above theory of uncostitutionality. The declaratory judgment action seeks a permanent injunction against implementation of the AIA, and an opinion that the entirety of the AIA is unconstitutional (based on a lack of severability clause).

A copy of the compliant is found (here)